Go Back

Bharti Airtel enters into a partnership with China Mobile to develop 4G technology, buy devices & equipment

The Economic Times :  March 04, 2015

Barcelona: Bharti Airtel has entered into a partnership with China Mobile, the world's largest telco, for jointly sourcing devices and equipment as well as developing 4G technology and standards, a development which will help India's biggest telecom operator take on Reliance Jio Infocomm.

"We are jointly (with handset vendors) working on a sub-$100 device which will support all bands of spectrum, and is likely to be out in the markets next year," Bharti Airtel Chairman Sunil Mittal told ETin Barcelona, a few hours after signing an agreement with China Mobile Chairman Xi Guohua on Tuesday. "We will do joint procurement. Carrier aggregation helps when you talk to vendors and suppliers," said Mittal.

"Equally, all vendors will know that we have aligned our standards and are supporting the same ecosystem. This partnership will provide a major platform for development and deployment of 4G and future mobile technology standards," said Mittal, adding that India and China account for nearly a third of all the mobile subscribers globally. He added that there have been no discussions with China Mobile on any financials or around the Chinese major picking up a stake in the Indian mobile phone operator.

"They want to understand the market. Will this evolve into something significant? Only time will tell," Mittal said. He gave the example of Vodafone, which picked up a 5% stake in Airtel and is now its biggest rival in the country. Under Tuesday's pact, Bharti Airtel and China Mobile have agreed to cooperate on standards and product development, besides "promoting a robust ecosystem to accelerate the commercialisation of TDDLTE".

In a joint statement, the two telcos also said they would together buy devices such as Mi-Fi, smartphones, data cards, among other products, all of which can be used to deliver 4G services.

TARDY PACE OF ROLLOUT

High-speed 4G services have long been the next frontier in India's fast-growing mobile Internet market and the much-anticipated Bharti Airtel-Reliance Jio face-off has been a subject of considerable interest for consumers and industry analysts alike. But five years after both companies paid top dollar to buy broadband wireless spectrum, the pace of rollout has been tardy. Bharti Airtel, which bagged licences to offer 4G services in four circles, and subsequently bought Qualcomm's airwaves in four more, including Delhi and Mumbai, has managed to launch in just five cities, netting a meagre 250,000 customers by end-2014. Reliance Jio, which has a pan-India licence, is yet to launch services.

Mittal conceded his company had not been able to break much ground and hoped the tie-up with the Chinese company would give an impetus to Bharti Airtel's 4G plans. "We are into the fifth year of BWA (4G) spectrum. Neither us nor Jio has done really anything big so far. In comparison, China Mobile last year had 100 million customers on TDD-LTE.

Now, we need to use their (China Mobile's) scale, power of procurement, understanding of this technology, and their handholding between 3G and 4G," he said. Unlike most parts of the world which offer LTE on the 1800 Mhz band, or the FDD-LTE technology standard, India and China offer 4G services using TDD-LTE mobile technology, a standard which uses airwaves in the 2300 Mhz band which is considered inefficient as it has a short range and therefore needs more telecom towers to set up a network.

BOTH TELCOS STAND TO GAIN

Further development in technology and standards will help both the companies. But for now, China has a far more developed TDDLTE ecosystem. "4G entrants have been constrained by the poor ecosystem in 2.3 Ghz and, as a result, 4G rollout has been delayed. That said, we note that Chinese operators have deployed very dense 4G networks with more than 1 million base stations at an early stage," Rajiv Sharma, analyst at HSBC Securities and Capital Markets, said in a note to clients last month. "China Mobile will have the single largest deployment of TDD-LTE in the next five years. We will be 10% of China Mobile," said Mittal.

He added that the only area where Bharti could support China Mobile was in helping its new partner improve spectrum efficiency. "We are currently packing four times per MB per Mhz compared with Singtel, for example. Global operators haven't worked around spectrum efficiencies.

We have some advantages that way," he said. The latest tie-up gives Bharti Airtel and China Mobile immense benefits of economies of scale to buy equipment and devices at very low prices, said industry trackers and analysts. "China Mobile's scale of purchase is 10 times that of Bharti Airtel's," said a senior analyst with a European brokerage firm. "So, such a joining of hands in terms of joint orders to equipment makers Huawei and ZTE can help in negotiating better costs."

"The TDD-LTE ecosystem is only in China at the moment, which when accessed by Bharti can offer them a huge learning curve," said another senior analyst with an American brokerage. Some analysts, however, questioned whether the tie-up will remain exclusive to Bharti Airtel as Reliance Jio, too, would be interested in a similar tie-up. Reliance Jio declined comment on the Bharti-China Mobile partnership.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

x IBEF : India Brand Equity Foundation